Furniture Manufacturer Business Plan

Trestle Creek Cabinets

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Financial Plan

7.0 Financial Plan

Below are the initial financial goals for the company:

• Obtain an operating line of credit from a financial institution.
• Finance growth through retained earnings.
• Operate on a 25-30% gross margin.

The financial plan for Trestle Creek Cabinets is outlined in the following sections.

7.1 Important Assumptions

The financial plan depends on important assumptions, most of which are shown in the following table as annual assumptions.

General Assumptions

General Assumptions
	2001	2002	2003
Plan Month	1	2	3
Current Interest Rate	10.00%	10.00%	10.00%
Long-term Interest Rate	10.00%	10.00%	10.00%
Tax Rate	16.25%	15.00%	16.25%
Other	0	0	0

7.2 Break-even Analysis

As the business settles in and start-up/showroom costs are met, average monthly operating costs will increase and then stabilize. The average per unit price is for a 24" base unit. This table shows we need to sell 16 units or 32 lineal feet of cabinets a month to break even.

Break-even Analysis



Break-even Analysis

Break-even Analysis
Monthly Revenue Break-even	$38,806
Assumptions:
Average Percent Variable Cost	68%
Estimated Monthly Fixed Cost	$12,327

7.3 Projected Profit and Loss

Our projected profit and loss is shown in the following table.

Profit and Loss

Pro Forma Profit and Loss
	2001	2002	2003
Sales	$442,000	$1,000,000	$1,500,000
Direct Costs of Goods	$301,600	$725,000	$1,087,500
Other	$0	$0	$0
	------------	------------	------------
Cost of Goods Sold	$301,600	$725,000	$1,087,500
Gross Margin	$140,400	$275,000	$412,500
Gross Margin %	31.76%	27.50%	27.50%
Expenses
Payroll	$78,000	$157,000	$195,000
Sales and Marketing and Other Expenses	$45,680	$44,600	$61,000
Depreciation	$0	$0	$0
Utilities	$3,000	$4,000	$5,000
Insurance	$1,140	$1,300	$1,500
Rent	$8,400	$9,000	$12,000
Payroll Taxes	$11,700	$23,550	$29,250
Other	$0	$0	$0
	------------	------------	------------
Total Operating Expenses	$147,920	$239,450	$303,750
Profit Before Interest and Taxes	($7,520)	$35,550	$108,750
EBITDA	($7,520)	$35,550	$108,750
Interest Expense	$4,000	$3,336	$1,937
Taxes Incurred	$0	$4,832	$17,357
Net Profit	($11,520)	$27,382	$89,456
Net Profit/Sales	-2.61%	2.74%	5.96%

7.4 Projected Cash Flow

We do not expect to have major problems with cash flow as most of our contracts will require a 50% deposit upon signing.

Cash



Cash Flow

Pro Forma Cash Flow
	2001	2002	2003
Cash Received
Cash from Operations
Cash Sales	$110,500	$250,000	$375,000
Cash from Receivables	$281,813	$687,272	$1,068,792
Subtotal Cash from Operations	$392,313	$937,272	$1,443,792
Additional Cash Received
Sales Tax, VAT, HST/GST Received	$0	$0	$0
New Current Borrowing	$0	$0	$0
New Other Liabilities (interest-free)	$0	$0	$0
New Long-term Liabilities	$0	$0	$0
Sales of Other Current Assets	$0	$0	$0
Sales of Long-term Assets	$0	$0	$0
New Investment Received	$0	$0	$0
Subtotal Cash Received	$392,313	$937,272	$1,443,792
Expenditures	2001	2002	2003
Expenditures from Operations
Cash Spending	$78,000	$157,000	$195,000
Bill Payments	$349,852	$774,249	$1,182,673
Subtotal Spent on Operations	$427,852	$931,249	$1,377,673
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out	$0	$0	$0
Principal Repayment of Current Borrowing	$0	$0	$0
Other Liabilities Principal Repayment	$0	$0	$0
Long-term Liabilities Principal Repayment	$0	$13,289	$14,681
Purchase Other Current Assets	$0	$0	$0
Purchase Long-term Assets	$0	$0	$0
Dividends	$0	$0	$0
Subtotal Cash Spent	$427,852	$944,538	$1,392,354
Net Cash Flow	($35,539)	($7,266)	$51,438
Cash Balance	$53,759	$46,494	$97,932

7.5 Projected Balance Sheet

The balance sheet shows a healthy growth of net worth and a strong financial position.

Balance Sheet

Pro Forma Balance Sheet
	2001	2002	2003
Assets
Current Assets
Cash	$53,759	$46,494	$97,932
Accounts Receivable	$49,688	$112,415	$168,623
Other Current Assets	$14,478	$14,478	$14,478
Total Current Assets	$117,925	$173,387	$281,033
Long-term Assets
Long-term Assets	$0	$0	$0
Accumulated Depreciation	$0	$0	$0
Total Long-term Assets	$0	$0	$0
Total Assets	$117,925	$173,387	$281,033
Liabilities and Capital	2001	2002	2003
Current Liabilities
Accounts Payable	$25,668	$67,037	$99,908
Current Borrowing	$0	$0	$0
Other Current Liabilities	$0	$0	$0
Subtotal Current Liabilities	$25,668	$67,037	$99,908
Long-term Liabilities	$40,000	$26,711	$12,030
Total Liabilities	$65,668	$93,748	$111,938
Paid-in Capital	$88,419	$88,419	$88,419
Retained Earnings	($24,642)	($36,162)	($8,780)
Earnings	($11,520)	$27,382	$89,456
Total Capital	$52,257	$79,639	$169,095
Total Liabilities and Capital	$117,925	$173,387	$281,033
Net Worth	$52,257	$79,639	$169,095

7.6 Business Ratios
The following table contains important ratios for the woodworking industry, as determined by the Standard Industry Classification (SIC) Code, #1751, .
Ratios

Ratio Analysis
	2001	2002	2003	Industry Profile
Sales Growth	0.00%	126.24%	50.00%	7.90%
Percent of Total Assets
Accounts Receivable	42.13%	64.83%	60.00%	35.00%
Other Current Assets	12.28%	8.35%	5.15%	30.30%
Total Current Assets	100.00%	100.00%	100.00%	71.50%
Long-term Assets	0.00%	0.00%	0.00%	28.50%
Total Assets	100.00%	100.00%	100.00%	100.00%
Current Liabilities	21.77%	38.66%	35.55%	42.70%
Long-term Liabilities	33.92%	15.41%	4.28%	14.30%
Total Liabilities	55.69%	54.07%	39.83%	57.00%
Net Worth	44.31%	45.93%	60.17%	43.00%
Percent of Sales
Sales	100.00%	100.00%	100.00%	100.00%
Gross Margin	31.76%	27.50%	27.50%	31.60%
Selling, General & Administrative Expenses	34.37%	24.76%	21.45%	16.70%
Advertising Expenses	1.27%	0.80%	1.00%	0.50%
Profit Before Interest and Taxes	-1.70%	3.56%	7.25%	3.40%
Main Ratios
Current	4.59	2.59	2.81	1.64
Quick	4.59	2.59	2.81	1.28
Total Debt to Total Assets	55.69%	54.07%	39.83%	57.00%
Pre-tax Return on Net Worth	-22.04%	40.45%	63.17%	7.50%
Pre-tax Return on Assets	-9.77%	18.58%	38.01%	17.40%
Additional Ratios	2001	2002	2003
Net Profit Margin	-2.61%	2.74%	5.96%	n.a
Return on Equity	-22.04%	34.38%	52.90%	n.a
Activity Ratios
Accounts Receivable Turnover	6.67	6.67	6.67	n.a
Collection Days	58	39	46	n.a
Accounts Payable Turnover	14.63	12.17	12.17	n.a
Payment Days	27	21	25	n.a
Total Asset Turnover	3.75	5.77	5.34	n.a
Debt Ratios
Debt to Net Worth	1.26	1.18	0.66	n.a
Current Liab. to Liab.	0.39	0.72	0.89	n.a
Liquidity Ratios
Net Working Capital	$92,257	$106,350	$181,125	n.a
Interest Coverage	-1.88	10.66	56.14	n.a
Additional Ratios
Assets to Sales	0.27	0.17	0.19	n.a
Current Debt/Total Assets	22%	39%	36%	n.a
Acid Test	2.66	0.91	1.13	n.a
Sales/Net Worth	8.46	12.56	8.87	n.a
Dividend Payout	0.00	0.00	0.00	n.a